Goldman Sachs Asset Management is launching four new municipal-bond exchange-traded funds, adding to the $129 billion corner of the state and local government debt market.
The firm, the investing arm within Goldman Sachs Group Inc., has created the actively-managed products which include a fund focused on ultra-short municipals and one that invests in tax-exempt debt sold by New York borrowers. More money managers have seized on demand for ETFs that are often lower-cost than mutual funds. The investment management business of Prudential Financial Inc. also introduced muni ETFs last month.
Inflows into muni ETFs in 2024 stand at roughly $5.4 billion, trailing last year’s pace when the funds collected more than $15 billion. However, demand has picked up in June and the products recorded an influx of over $2 billion, the biggest month so far this year, according to Bloomberg Intelligence data.
Brendan McCarthy, global head of ETF distribution at Goldman Sachs Asset Management, said the company wanted to stick with its “DNA” and strong record of actively-managing muni funds.
“This is a suite of products we want to have on the shelf and our clients are asking for us to have on the shelf,” he said.
Goldman Sachs has previously launched a passively-run muni ETF that has been slow to gather assets. McCarthy noted that the passive arena is crowded within the municipal market, making it tougher for firms to gain market share.
BlackRock Inc. and the Vanguard Group dominate the passively-run muni ETF space. Just two of their funds account for over half of muni ETF assets overall, according to data compiled by Bloomberg.
Tax Benefit
One of the new Goldman funds — the Goldman Sachs Dynamic New York Municipal Income ETF, which will trade on the ticker GMNY – focusing on tax-exempt debt sold by local governments in New York. Another will center on California borrowers.
Demand for municipal bonds — which pay tax-exempt interest – is especially high in New York and California given the high income tax levies in both states.
Investors are starting to think about the tax efficiency of popular money-market fund holdings, said Scott Diamond, co-head of municipal fixed income at Goldman Sachs Asset Management. He said the ultra-short muni ETF, which will trade under ticker GUMI, would appeal to those those buyers given it’s a cash-like product that pays tax-exempt interest.
Investors are focused on cash, Diamond said. “An ultra-short vehicle that will have that flexibility to maneuver around in the front end of the tax-exempt market could be really appealing.”
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